Sell in May

[Free bird]

I couldn't resist posing the question to ChatGPT for a little historical context.
"The adage "sell in May and go away" is a well-known investment strategy that suggests investors should sell their stock holdings in May and avoid the stock market until November, when they should re-enter the market. The idea behind this strategy is that the stock market tends to underperform during the summer months, while the winter months typically see stronger market returns.

The origin of the phrase is not entirely clear, but it is thought to have originated in the UK in the early 20th century, when wealthy investors would leave the city for the summer months to escape the heat and engage in leisure activities. The strategy was popularized in the 1980s and 1990s by investment analysts who noticed a seasonal pattern in stock market returns.

However, it is important to note that the "sell in May and go away" strategy is based on historical patterns and is not a guaranteed way to make money in the stock market. While there may be some truth to the idea that the stock market tends to underperform during the summer months, this is not always the case. Additionally, the strategy assumes that investors will be able to accurately time the market, which is notoriously difficult to do.

Ultimately, whether or not "sell in May and go away" is a good investment strategy depends on an individual's investment goals, risk tolerance, and overall investment strategy. It is important for investors to carefully consider their investment decisions and consult with a financial professional before making any major investment decisions."

The origin of the phrase is not entirely clear, but it is thought to have originated in the UK in the early 20th century, when wealthy investors would leave the city for the summer months to escape the heat and engage in leisure activities. The strategy was popularized in the 1980s and 1990s by investment analysts who noticed a seasonal pattern in stock market returns. This story sounds very plausible. Sell in May be filed under folklore & urban legend. Thanks everyone.

 

[copyright1997reloaded]

The origin of the phrase is not entirely clear, but it is thought to have originated in the UK in the early 20th century, when wealthy investors would leave the city for the summer months to escape the heat and engage in leisure activities. The strategy was popularized in the 1980s and 1990s by investment analysts who noticed a seasonal pattern in stock market returns. This story sounds very plausible. Sell in May be filed under folklore & urban legend. Thanks everyone.

Years ago (prior to Internet everything), volumes in the summer tended to be lower partially because many "in the money" in the NYC area would vacation in the Hamptons. Seasonal trends do exist (e.g. end of quarter volume) and end of quarter rebalancing effects.

As some have already noted, anything that is known can be gamed, e.g. if a index rebalancing date is at the end of a quarter, then traders can (before that) attempt to game out index changes in advance and buy/sell based on anticipated changes...thus partially or completely offsetting the effect.

There are also seasonal trends in things like house sales/prices, especially in places like Florida. Again, these can be washed out by larger forces, e.g. changes in economic conditions.

Myself, I don't pay any attention to potential seasonal aspects.

 

[ls99]

I let Vanguard decide if.

 

[dmpi]

The minute I try it, May will see 8-10% gains.

 

[Dtail]

Apparently I have been promoted to "Dryer sheet aficionado"

17 more posts and you will be promoted again to "Recycles Dryer Sheets".

 

[Graybeard]

but I did read Sy Harding's book "Riding the Bear" where he explains his refined Seasonal System. (It involves 16 Oct, 20 April and a MACD crossover) The details can be found in various articles on the web as Sy Harding died almost 10 yrs ago I guess.

It has been shown to be effective and more productive than B&H on a risk adjusted basis. How much is enough? That's for The User to decide. As far as triaging out the efficacy of these systems? My view: Most have been known for over 100 years. Not too likely all of a sudden the past 2-5-10-20 years people have been jumping on the bandwagon and dissipating their effectiveness. There are too many other "systems" and concomitant resistance to them. IOW: People are doing what they always do, which is to say "never ONE thing."

Hulbert used to rank lots of these systems and newsletters, and Sy Harding's was always one of the highest rated ones. Like any timing system it doesn't hit the mark every time (just like B&H) but you can't lose big either. That's what they're for. But they usually let you sleep better during times of tribulation

Sy Harding, I was trying to remember his name reading this thread last night. His system was surprisingly successful until a lot of people started to use it. If you can use a system that the general population doesn't know about you might make out, but when "they" discover "it" then typically it's success drops off. Maybe Sy just stumbled upon a time period where his system worked, it was tempting to do it but I never did.

So I have held the Vanguard Extended Market Index (mid and small caps) for 1 1/2 or 2 1/2 years. I have been patient after making a lot and then it just evaporated month after month. On Friday I just had enough, the market was up 2 days in a row, the Russell 2000 was up a few percent and I said the heck with this, I have had enough. So I took the $20k combined loss in my rollover IRA and Roth IRA. I can park the money in T bills and if I am lucky and the market tanks, I can put those funds in those 2 accounts into the Total International and Total Stock market indexes. Sooner or later I'll get it back into those 2 funds and I no longer have the aggravation of that fund.

 

[jazz4cash]

Fidelity has an article on this topic. Their take is that it’s better to use a seasonal rotation strategy.

https://www.fidelity.com/viewpoints/active-investor/sell-in-may

 

[luckydude]

It's a nice thought. You can find data to support or refute timing rules.

Institutions usually address these things:
https://www.fidelity.com/viewpoints... stock market,has been November through April.

On average it might work, but there's a chance we could have succesive summers where above-normal growth occurs.

Do you feel lucky?

Well, I've been lucky all my life, so maybe I'll give it a try. I'll sell $100 on May 1 and see what happens. If my luck holds, I'll jump back into the market in the fall and make an extra $2 by the end of the year, and that'll enough to get me one crunchy taco supreme ($1.79 + tax) at Taco Bell.

 

[gayl]

I used to "sell in May and go away" until October putting the $$s in fixed income. But it didn't really benefit me any more than simply rebalancing to my overall desired asset allocation. Now I don't pay any attention to the time of year and do better

 

[target2019]

Does anyone practice sell in May with a portion of their stock market money? Or is it a waste of time?

It's a nice thought. You can find data to support or refute timing rules.

Institutions usually address these things:
https://www.fidelity.com/viewpoints... stock market,has been November through April.

On average it might work, but there's a chance we could have succesive summers where above-normal growth occurs.

Do you feel lucky?

Well, I've been lucky all my life, so maybe I'll give it a try. I'll sell $100 on May 1 and see what happens. If my luck holds, I'll jump back into the market in the fall and make an extra $2 by the end of the year, and that'll enough to get me one crunchy taco supreme ($1.79 + tax) at Taco Bell.

Thanks for quoting everything I wrote.

I was going to add that you could try the method with some amount and see what happens. I've done that in the past out of curiosity.

If you sell $100, and money funds stay about the same, you'll have $102.00. So you'll have your taco and $100 to buy back at a discount.

What will you be selling? I may join the club for the summer.

 

[Andre1969]

I googled it and this was the first thing that came up...
"Historical data have generally supported the “Sell in May and Go Away” adage over the years and since 1945. The S&P 500 Index has recorded a cumulative six-month average gain of 6.7% in the period between November to April compared to an average gain of around 2% between May and October."

So, it sounds like you're more than likely to hit a soft spot or rough patch in the May-Oct timeframe, than in the Nov-Apr timeframe. But overall, the market still usually moves upward. Just less so, during that May-Oct timeframe.

Looking back at my own data, there have been some years where if I sold it all off in May and bought back in October, I would have made out. But I would have been better off simply rebalancing during the various peaks and valleys during those months, rather than being out of the market and then jumping back in.

 

[luckydude]

Thanks for quoting everything I wrote.

I was going to add that you could try the method with some amount and see what happens. I've done that in the past out of curiosity.

If you sell $100, and money funds stay about the same, you'll have $102.00. So you'll have your taco and $100 to buy back at a discount.

What will you be selling? I may join the club for the summer.

I'll up the ante a bit and sell USD $10k in my 401(k) in Fido just for fun. This way I don't have to deal with taxes. I'll sell from the Fido Total Mkt Index Fund and stick the money in a MM. I'll give it 4 months and buy back the same fund at the beginning of Sept. If all goes well, I'll have extra $200 for 100 crunchy taco supremes for the rest of the year

 

[Dash man]

I just had some covered call options assigned on Friday, so I bought into some more SCHY to increase my international exposure. Does that count?

 

[Major Tom]

I'm one of those terribly dull people who do virtually nothing with their portfolio, which consists solely of just two mutual funds. I don't have the combination of desire and skill for any kind of market timing to be beneficial to me. Luckily, I don't think I do either, so I just do nothing. In this line of endeavor, doing nothing is better than doing something, unless you genuinely know what you're doing. I believe that a few here do.

 

[OldShooter]

I'm one of those terribly dull people who do virtually nothing with their portfolio, which consists solely of just two mutual funds. I don't have the combination of desire and skill for any kind of market timing to be beneficial to me. Luckily, I don't think I do either, so I just do nothing. In this line of endeavor, doing nothing is better than doing something, unless you genuinely know what you're doing. I believe that a few here do.

Agreed.

Warren Buffett:

"Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell." ... "Lethargy, bordering on sloth should remain the cornerstone of an investment style."
​

“The stock market is a device for transferring money from the impatient to the patient.”
​

Our last equity trade was maybe a year and a half ago, part of a "weeding the garden" effort that got us down to holding just one equity fund. I see no need for more.

Re skill, there is no evidence that market skill exists. Dr. Kenneth French on identifying superior managers: https://famafrench.dimensional.com/videos/identifying-superior-managers.aspx

 

[Timeisprecious]

I'm thinkin for everyone who thinks May is good time to sell there has to be one who thinks May is a good time to buy..

+1

 

[Montecfo]

The adage seems to still hold. And given the slowing economy I do not expect the market to perform particularly well until earnings have bottomed- which seems unlikely to happen before Labor Day.

 

[target2019]

The adage seems to still hold. And given the slowing economy I do not expect the market to perform particularly well until earnings have bottomed- which seems unlikely to happen before Labor Day.

Some will take the May-go-away wager for $100, $1,000, even $10,000.

Those amounts seem reasonable, as a percentage of total invested.

I'm thinking of the soul who'll go $100,000. Or is it more fun at an overseas gambling spot, sittting at the roulette table?

 

[GravitySucks]

My sell in May is to sell enough in May to not ruin the summer worrying about investments and just enjoy the good weather. Will sell off 4 months worth of expected expenses this month then try not to look at the Fido account till October

 

[marko]

As a dividend investor, my income is based on the number of shares, not the share price.

Selling at any time cuts the income I'm living on. Good, solid dividend payers go up and down in price but the payments remain steady.